All Forum Posts by: John Dean

The case I'm referring to is setting up an LLC, buying the property under the LLC, and then self managing. From what I've heard, if you are self managing, the LLC doesn't provide any legal benefit. If you hire an external management company, it does provide a legal benefit.

This may get more complicated if you are a large operation that owns both the property and the property management company that manages. 

@Cody Paratore let me know if you find out any further info on that - I'm really curious to hear their answers if you pose these different scenarios and they explain how the LLC will reduce liability when self managing. It'd be great if it does

@Cody Paratore on the other hand an LLC is very useful if you have investors. Say you are the managing member, plan to manage the asset, and raise money from investors who want a return and to be legally protected. You form an LLC to deploy their investment while you "manage" the company/asset. This is why it's common to see investment groups form LLCs when purchasing real estate as well as use professional management - it separates out the liability and there are different pools of money involved in each deal.

@Cody Paratore haha sounds about right and I'm sure it varies state to state. I did a quick search and found this BP member facing an LLC issue https://www.biggerpockets.com/forums/12/topics/529833-self-manage-no-liability-protection-under-llc

Basically, when someone forms a lawsuit they sue everyone they can. Assume 2 situations of property management.

1. You own through an LLC and have a management company manage the asset - the tenant will still sue you but the management company will likely be responsible for any fault. You are paying the management company to maintain the property and essentially transferring liability to them.

2. You own through an LLC and self manage - this time the tenant sues you personally as well as your LLC. Your LLC case may get dismissed but you are still personally responsible for managing the property. Even if you have all of your properties in LLCs, if the claim is large enough you still may need to liquidate those assets to cover the claim. Are those other LLCs protected? Yes. But it doesn't matter because you need the money anyways.

I think the best ways to protect yourself are probably an umbrella policy, your lease contract, clear communication with tenants, and quickly responding to emergencies that may lead to bigger issues. I could be wrong on this and I'm sure it varies state to state but the person who advised me personally owns 100+ units, self manages, and is also a practicing attorney. I felt like if he feels the LLC is worthless then I shouldn't waste my time.

@Dustin Tran are you working with $150k cash or is that the total budget? If you can leverage the cash you should be able to find something, if that’s the total budget there’s not much out there that I’m aware of but I haven’t looked outside of Dallas proper

@Cody Paratore better check with an attorney on that. From my understanding, from consulting an attorney, if you are self managing the LLC is easily pierced in a lawsuit. All of my properties are owned in my name because I self manage. If I were to hand things off to a management company then I'd re-evaluate.

Hi @Mark Miles, great posts on the general benefits of offshore. I’m curious about your specific use cases in performing complex tasks in real estate (beyond finding towels or messaging a maintenance person). 

I’ve been hiring offshore for years for software development and I’ve found it’s very difficult to find someone good and the turnover is really high (they can go dark at any point without warning). It’s also difficult to introduce new tasks because you usually end up micromanaging and spending your day just making sure simple things get done. For example I’d assign them a task but because I didn’t spend enough time writing out the parameters they end up billing 5x more hours on the job - is it really worth it if I have to spend that much time spelling out the job and micromanaging? 

With software out there like Smartbnb I guess I'm curious where you find value in these VA's and whether you feel it's more trouble than it's worth.

@Patrick Bavaro you need to have a conversation with your tenant and set out the rules in the lease as well as what you expect of him - in a friendly manner. Most people are very reasonable and he probably isn’t thinking. Work it out. It’s your responsibility as the landlord to clearly communicate with your tenant.

If you want to waste your money and stress a ton, hit him with an eviction notice and get lawyers involved. IMO that is a total waste of time but once you escalate there is no going back to just working things out as friendly neighbors.

Investment Info:

Single-family residence buy & hold investment in Dallas.

Purchase price: $280,000
Cash invested: $90,000

Cash out refinance, appraised at $500k 2 years later with 3% 30 yr APR

What made you interested in investing in this type of deal?

First renovation, income generating ADU on property

How did you finance this deal?

Conventional

How did you add value to the deal?

Did renovation work myself along with some subcontractors

What was the outcome?

Similar to BRRR where I live for free and profited off of the renovation through cash out refinance

Handymen can typically be hired on a contract basis if you don’t want to do the work yourself. Unless you own a large commercial property you’re typically better off having a list of preferred vendors rather than employing someone full time. Many property management companies don’t have in-house labor, they keep a list of subcontractors to call